NORVESTIA’S VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE

Helsinki, Finland, 2016-04-14 10:45 CEST (GLOBE NEWSWIRE) --  

Norvestia Oyj       Stock Exchange Release            14 April 2016 at 11:45

NORVESTIA’S VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE

1. Norvestia’s voluntary change in accounting principle since 1 January 2016

Valuing investments in associates at fair value through profit or loss

Norvestia’s Board has decided to apply the venture capital organization exemption of the IAS 28 standard and to value associates and joint ventures at fair value through profit or loss in Norvestia’s consolidated IFRS financial statements according to the IAS 39 standard from 1 January 2016. As a result, all Norvestia’s investments will be valued at fair value through profit or loss. Norvestia considers the valuation of investments at fair value to give more meaningful information about the real value of investments and to better describe the company’s business, the company’s way of reviewing its investments and making decisions relating to them.

Similarly, investments in unlisted private equity funds previously booked as available-for-sale financial assets will be reclassified as financial assets at fair value through profit or loss. Thus, in future any change in value will be recognized directly in profit or loss, and not in the statement of comprehensive income. Norvestia believes that classifying investments as assets at fair value through profit or loss better describes their nature and the accumulation of returns taking into account the company’s business.

The change in question is a voluntary change in accounting principle according to the IAS 28 standard which requires that comparative figures be presented retrospectively according to the new accounting principles, including the balance sheet at the beginning of the first comparative period. The presentation of the balance sheet and income statement has been clarified as described below and the information on comparative periods has been presented according to the new balance sheet and income statement formulas.

The balance sheets and income statements created in accordance with the new accounting principles for 2015 and for interim financial periods which ended 31 March 2015, 30 June 2015 and 30 September 2015, as well as the opening balance 1 January 2015 of the comparative period are presented below.

Clarification of presentation of balance sheet and income statement

Again, the presentation of Norvestia’s balance sheet and income statement has been clarified to better describe the company’s business. In the balance sheet Norvestia’s investments have been divided into the investment portfolio (non-current assets) and into financial assets held for trading (current assets). Investments are further divided in the respective portfolios according to their nature and risks into six different categories: Growth Equity, investments in private equity funds, loan receivables from Growth Equity investments, investments in listed shares and funds as well as interest-bearing investments.

In the income statement the company’s returns will be presented as gains from investment activities with realized and unrealized returns separately in their own lines. Because all investments are now valued at fair value through profit or loss, the unrealized fair value movements of investments will no longer be recognized in the comprehensive income.

2. Significant discretion used by management in preparing consolidated financial statements

a. Determining fair values

The company’s management must use its discretion in determining the fair values of unlisted companies it has invested in. The discretion is related to both selecting the most suitable valuation method and determining the assumptions used in the selected methods. Valuation methods are selected investment by investment.

b. Venture capital organization status

Norvestia’s management has determined, in connection with Norvestia’s new strategy, that its subsidiary Norvestia Industries Oy is a venture capital organization defined in the IAS 28 standard, in which case valuing investments in associates and joint ventures at fair value is possible in the consolidated financial statements. Norvestia Industries Oy mainly focuses on private equity investment activities by investing in unlisted growth companies with the aim of contributing to the increase in their value by actively participating in company development and making a return mainly though the value increase of its portfolio companies in the medium and long term.

Norvestia to cease publishing Net Asset Value monthly

Norvestia has until now published its Net Asset Value monthly, but due to the change in accounting principle the company will no longer publish Net Asset Value reports. After the change the Group’s shareholders’ equity presented on quarterly Interim Reports will correspond with the company’s Net Asset Value which better describes the company’s business and the real value of investments.

THE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE ON OPENING BALANCE SHEET

All investments of the Group will be classified as financial assets at fair value through profit or loss from 1 January 2016. The adjustments above result from the change in accounting principle and from the clarification of presentation of the balance sheet described above. Deferred tax liability will be allocated to the change in value of Growth Equity investments.

ADJUSTED QUARTERS FOR 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, ADJUSTED  

CONSOLIDATED STATEMENT OF FINANCIAL POSITION, ADJUSTED  

CONSOLIDATED STATEMENT OF CASH FLOWS, ADJUSTED

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY, ADJUSTED  

Norvestia will publish 20 April 2016 its Interim Report for 1 January–31 March 2016 prepared according to the new accounting principles.

Norvestia Oyj

Juha Kasanen
Managing Director

DISTRIBUTION
Nasdaq Helsinki
Main media
www.norvestia.fi